Key and Goff spar over cash deferral to super fund

John Key says that while the Government had not kept up the $2 billion payment, it would be paying $250 million during the worst economic conditions in 30 years. Photo / Mark Mitchell

The battle over superannuation raged yesterday with National insisting an estimated 11-year deferral in big payments to the NZ Superannuation Fund would not affect future entitlements but it is promising an annual review of its payments.

Labour said Prime Minister John Key was another in a long line of National leaders adept at breaking promises to maintain superannuation entitlements.

The pension is paid from general taxation at present and the fund is a long-term investment vehicle set up to offset the costs of super in 2030 when the bulge of baby boomers will put more pressure on the general tax base.

Mr Key said that while the Government had not kept up the $2 billion payment, it would be paying $250 million during the worst economic conditions in 30 years.

"On a year-by-year basis we will be reviewing how much we put in - it could be more next year, arguably it could be less."

National says Labour is scaremongering over the effects of a contributions holiday.

The Treasury has estimated that by 2050, with an 11-year contribution holiday, the fund would pay for 8 per cent of New Zealand's universal superannuation bill that year, compared with 11 per cent if there had not been an 11-year holiday.

Finance Minister Bill English said Labour had not factored in the financing costs of borrowing into its calculations of an estimated $37 billion shortfall in the fund from what had been originally expected by 2030.

Mr Key reinforced National's view that it would have had to borrow more to pay into the fund, which could have contributed to a downgrade in New Zealand's credit rating.

Labour leader Phil Goff said the suggestion that money had to be borrowed for the fund was "a lie".

"That is one of the big lies that the National Party have perpetrated. They no more borrow for the superannuation scheme than they borrow to pay for the tax cuts they brought in on April 1, or borrow to pay for health or education services."

Mr Goff questioned Mr Key's "cast-iron" guarantee in Parliament that super entitlements would not change asking if it was as cast-iron as his promise six months ago to cut tax and which had been reneged on.

Mr Key replied: "We are borrowing the better part of $10 billion this year and next year and quite a few more years and money isn't just fairy dust ... We either earn it from tax revenue or basically we borrow it. At the moment we are borrowing it."